Through a Glass Darkly: How Securities Disclosures Give a Distorted View of the Economy

Our understanding of the American economy often relies on stylized facts derived from mandatory disclosures by listed corporations. Data vendors like Standard & Poor’s vacuum up 10Ks and proxy statements into databases, and scholars distill these into tentative maps. This may have been adequate for a postwar economy centered on asset-heavy manufacturers, but it is increasingly out of step with an information-based economy. Companies listed on the stock market are fewer in number and less representative than they were, light in tangible assets and people, and heavy on IP. Basic facts such as what industry they are in are increasingly perplexing, which renders standard economic statistics such as industry concentration misleading. Most of the companies going public in recent years are perpetual money-losers in biotech and “software.” And we know next to nothing about their “human capital,” in spite of updates to Regulation S-K. This Article will show how the evolution of corporate disclosures affects how interested parties interpret the data the disclosures produce, how those interpretations obfuscate our understandings of modern corporations in a data-driven economy, and how we can establish interpretations of corporate data that faithfully portray the modern economy.